New Delhi: The blanket iron ore mining ban imposed in Karnataka’s Bellary district one month ago was extended to Tumkur and Chitradurga districts by the Supreme Court (SC) on Friday.
The move is likely to further squeeze steel production and also stoke another round of price hikes as companies obtain iron ore from alternative sources.
The court passed the order at a public interest hearing where the Central Empowered Committee (CEC) submitted a report that said the environmental degradation in Tumkur and Chitradurga had gone too far, similar to the Bellary district. CEC is a fact-finding body appointed by the court to assist it in environmental cases.
Steel manufacturers told the court they would have to shut down their plants in the next four-five days if the ban was imposed, as they were unable to keep their blast furnaces running.
“Two factories are already closed. The remaining are operating at 40% capacity. The furnaces need to be kept going at full capacity. We need iron ore above 60 Fe grade (high grade),” senior counsel K.K. Venugopal said on behalf of an iron and steel manufacturers association.
He said steel makers in the region needed 2.2 million tonnes (mt) of iron ore per month in order to meet production demands and that it would take them weeks to revive their blast furnaces.
The court’s forest bench, comprising Chief Justice S.H. Kapadia and justices Aftab Alam and K.S. Radhakrishnan, fended off strong arguments by a battery of senior lawyers, who were all appearing for mining companies and steel producers.
“Ultimately we have to balance (the) economy, development on one side, with environment on the other side. We understand the problems. You can’t say let the environmental degradation go on, but you can’t stop our industry from functioning,” the court said as it passed the ban order.
“We will go by Article 21 (right to life). We are not going by ordinary law. According to us, Article 21 is a higher right (in comparison to the right to do business).”
The ban in Karnataka is a pointer to the higher procurement cost of iron ore, already costly owing to global shortages, and it could cascade down to the user industry, steel industry members said.
“We have about eight days’ inventory left,” said R.V. Gumaste, managing director of Kirloskar Ferrous Industries Ltd, which produces 50,000 tonnes of grey iron castings a year from its plant in Koppal district, where one of its two blast furnaces was closed three months ago.
The company’s castings are used by at least 15 automobile and tractor makers, including Eicher Motors Ltd, the Escorts Group, Tata Motors Ltd, Daimler and Volvo, who would not take any supply cut-off, Gumaste said .
“Chitradurga and Tumkur were our last ray of hope. Now we have to look out of the state for a supply, but that has logistics issues and pricing issues,” he added.
The court said it will release iron ore from an existing stock of 25 mt, which CEC compiled from assessing inventories of all the miners in the area.
The court asked the miners and steel makers to meet with amicus curiae Shyam Divan, who is assisting the court in this case, and with India’s attorney general Goolam E. Vahanvati, who is representing the ministry of environment and forests, and with officials of CEC to decide what amount of iron ore is needed to be released immediately in order to ensure that steel production does not suffer.
“We are ourselves aware of the economic problem. You sit with the AG (attorney general) and others—we are prepared to release 25 mt. We have to put some pressure. Otherwise things will not change,” the court said.
“Today we want to work out if the steel industry’s needs can be met with the existing stock of 25 mt,” the court said. It also reassured the industry that it was trying to expedite the process of assessing the environmental damage in the area, along with a rehabilitation plan.
“Don’t treat this matter as adversarial. We are all interested in environment. We are all interested in economy and development. We have to balance them,” the court told the miners.
Vahanvati and Divan are to submit their assessment to the court at a hearing next Friday.
The court also directed the Indian Council of Forestry Research and Education to extend its macro-environmental impact assessment from Bellary district to Tumkur and Chitradurga as well. The court had directed the environmental impact assessment to be performed on 5 August.
It also directed the joint team of CEC and officials from the Karnataka government to survey and demarcate all the mining leases in all three districts. “Get us the rehabilitation plan and things will work out,” said Chief Justice Kapadia.
Iron ore that might be sold to steel companies from existing stocks will be only for steel makers in the region, who will have to pay a 10% royalty on the market price.
CEC has been directed to maintain accounts of the iron ore sale as well as royalty payments. The court said it intends to use the royalty separately for rehabilitation of the degraded area.
Steel secretary P.K. Misra told reporters on the sidelines of a function in New Delhi that NMDC Ltd will be able to step up its iron ore output in a couple of months to 1 million tonne a month, which could provide a relief to the companies. “Companies should be able to stabilize very soon,” Misra said.